US stocks: what has worked

Good morning. We will know a lot more about the state of the corporate world and indeed the economy by the end of this week. Everyone from Big Tech to chipmakers to staples companies to homebuilders is set to report results. Unhedged is optimistic. You? [email protected].  

It’s been painful to own stocks in 2022, but what kind of stocks one owns has mattered. We all know the three basic themes of the year: energy good, defensive good, speculative tech bad. But a more granular look is useful, if we want to think about what might work well for the rest of the year and into 2023. The most powerful determining factors may be inflation, Fed policy and GDP growth, but that is not the whole story.

Here is the average performance of stocks in the S&P 500’s ten sectors (note this is not capitalisation weighted; each stock in the index contributes the same amount to these averages; I’m trying to get at what has worked and not from the point of view of individual stock selections).